Goldman Sachs Gashes Priceline Group Inc, Tripadvisor Inc

Priceline Group Inc (PCLN) and Tripadvisor Inc (TRIP) are off sharply today, which is bad news for bullish option traders

by Alex Eppstein

Published on Jan 27, 2016 at 12:32 PM
Updated on Jun 24, 2020 at 10:16 AM

Goldman Sachs is taking online travel stocks to the woodshed today. Specifically, bearish notes from the Wall Street kingpin are hammering Priceline Group Inc (NASDAQ:PCLN) and Tripadvisor Inc (NASDAQ:TRIP), and hurting the prospects of bullish option traders. Below, we'll take a closer look at the broader implications of the brokerage firm's downwardly revised opinions on PCLN and TRIP.

Goldman Sachs lowered its rating on PCLN to "neutral" from "buy," citing a stronger dollar, increasing competition, and slowing growth opportunity. To make matters worse, the firm slashed its price target on the stock to $1,200 from $1,500, which was followed by a price-target cut to $1,333 from $1,475 at Deutsche Bank, in what is quickly becoming a trend. As such, the shares were last seen 3.5% lower at $1,072.68. Since hitting a record high of $1,476.52 in early November, PCLN has plunged over 27%.

Today's sharp losses may be rattling the stock's bullish holdouts in options land. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open 1.56 calls for every put in the last 10 sessions -- a ratio that outstrips all but 2% of readings taken in the prior year.

Echoing this, Priceline Group Inc's Schaeffer's put/call open interest ratio (SOIR) rests at an annual low of 0.70. In other words, short-term speculators have never been so call-focused over the last 12 months. If bullish option traders begin to hit the exits amid the stock's free-fall, PCLN could run into even more turbulence ahead.

Goldman Sachs also dropped its opinion of TRIP to "sell" and slashed its price target to $59, due to "likely headwinds from light mix of large hotels, attractive multiples, stronger dollar." It also noted the company "could be an attractive M&A target" for larger online travel agencies.

At last check, TRIP has shed 2.4% at $68.01. Taking a small step back, it's been a brutal year for the shares, which have already lost about one-fifth of their value in 2016, and have underperformed the broader S&P 500 Index (SPX) by nearly 12 percentage points during the past month.

That hasn't kept option traders from placing upside wagers on TRIP. The stock's 10-day ISE/CBOE/PHLX call/put volume ratio of 3.14 ranks in the top quartile of its annual range, with three times as many calls bought to open as puts. Alternatively, some call buyers may be short sellers seeking protection, as 14.3% of the equity's float is sold short -- which would take three weeks to cover, at TRIP's average daily trading volumes.

Elsewhere, the brokerage crowd has clearly taken a glass-half-empty approach toward Tripadvisor Inc. Of the 21 analysts tracking the shares, 18 have handed out a "hold" or worse rating.

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